When respondent voluntarily terminated his employment as an account executive in petitioner securities broker's San Francisco office for a similar position with a competitor, petitioner determined, pursuant to a forfeiture clause of its employees' profit-sharing plan, that respondent, by entering competitive employment, had forfeited all rights to the plan's benefits. Respondent sought a declaratory judgment in a California state court that the forfeiture clause was unlawful under § 16600 of the California Business and Professions Code, which invalidates every contract restraining a person from engaging in a lawful business. Petitioner answered, inter alia, that a condition of respondent's employment with petitioner was approval by the New York Stock Exchange; that respondent, at the time of his employment, applied on an Exchange form for such approval, as required by Exchange Rule 345(a)(1), pledging to abide by Exchange rules; and, as required by Rule 347(b), agreed to submit to arbitration any controversy arising out of termination of his employment. On petitioner's appeal from the denial of its petition for an order directing arbitration, the California Court of Appeal held that a written agreement to arbitrate did exist, but that the forfeiture clause of the profit-sharing plan was invalid as in restraint of trade under California law when applied to California residents, and petitioner's contributions under the plan were wages under provisions of the California Labor Code giving wage earners a right of action for wages due and unpaid despite any private agreement to arbitrate.

Held: Exchange Rules 345(a)(1) and 347(b), promulgated as self-regulatory measures pursuant to § 6 of the Securities Exchange Act of 1934 (the Act), and respondent's pledge to abide by those rules do not preempt the avenues of wage relief otherwise available to respondent under California law. Pp. 414 U. S. 125-140.

(a) Rule 347(b) does not fall under the Exchange's mandate to protect the investing public and to insure just and equitable trade practices set forth in §§ 6(d) and 19(b) of the Act, so as

to require preemption of contrary state law by such rule, there being nothing in the Act or any SEC rule or regulation specifying arbitration as a favored means of resolving employer employee disputes, and it being clear that Rule 347(b) would not be subject to the SEC's modification or review under § 19(b). Pp. 414 U. S. 134-136.

(b) Rule 347(b) cannot be categorized as part of a need for uniform national regulation, there being no revelation in the Act or in any SEC regulation that nationwide uniformity of an exchange's housekeeping affairs is necessary, and it not being shown that national uniformity in the area of wage claims is vital to federal securities policy. Pp. 414 U. S. 136-137.

(c) The "applicable state laws" referred to in § 6(c) of the Act, which subjects exchange rules to a requirement of consistency with the Act, "and the applicable laws of the State in which it is located," are not, in this instance, merely because the New York Stock Exchange is in New York City, the laws of New York so as to require the California court to apply New York law compelling arbitration of this dispute and validating the forfeiture clause of the profit-sharing plan, since § 6(c) has no independent existence creating some sort of spurious uniformity of application for all States, but merely requires that any exchange rule adopted outside the Act's context comport with the laws of the State in which the exchange is located. Pp. 414 U. S. 137-139.

(d) Where California has manifested a strong statutory policy of protecting its wage earners from what it regards as undesirable economic pressures affecting the employment relationship, that policy should prevail absent any interference with the federal regulatory scheme; in this case, there is not only no such interference, but the Act's structure manifests a congressional intent that state policies in this area should operate vigorously. Pp. 414 U. S. 139-140.

(e) Even though petitioner's profit-sharing plan is open to all eligible employees in the United States, and respondent's employment and petitioner's business are interstate, the application of the California law would not unduly burden interstate commerce. P. 414 U. S. 140.

24 Cal.App.3d 35, 100 Cal.Rptr. 791, affirmed.

BLACKMUN, J., delivered the opinion of the Court, in which all Members joined, except STEWART, J., who took no part in the decision of the case.

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